My paper is ready.
I want to make this sentence into a question. In my view, it would be
Is my paper ready?
Is it correct according to English grammar? It might be correct but I need a reference.
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Yes- definitely correct.
EDIT: to add some explanation: if you have a sentence of the form "[Noun Phrase] [to be] [Adjective]" - as in your example, "My paper [NP] is [to be] ready [Adj]," to turn it into a yes/no question, your guess about how is correct: "[to be] [Noun Phrase] [Adjective]?"
Statement: The cat is orange. Question: Is the cat orange?
Statement: This exercise is bad. Question: Is this exercise bad?
Statement: John is angry. Question: Is John angry?
Statement: My skin is itchy. Question: Is my skin itchy?
Statement: Your coat is nice. Question: Is your coat nice?
Statement: That movie is scary. Question: Is that movie scary?
Statement: She is funny. Question: Is she funny?
Statement: It is pointless. Question: Is it pointless?